EUR / USD forecast: Euro closes week positive against dollar due to COVID variant
The euro recovered from its nearly five-month lows against the dollar on Friday and managed to end the week positive for the first time after two periods with red numbers.
EUR / USD started the week with a clear negative bias, and in fact the pair fell to perform at levels not seen since June of this year, near 1.1200. However, on Friday alarms were raised in the market with the confirmation of a new variant of the coronavirus that could put the brakes on the global economic recovery.
According to the WHO, the Omicron variant could be very contagious and has recommended limiting travel between countries, with which experts fear the return of quarantine measures.
This would cause the world’s major economies to suffer from limited mobility and further disrupt supply chains and workforce expansion.
In the US, the market has greeted the news with concern as pundits trust Federal Reserve action in the coming months, however, the new variant could put the US economy in check and therefore plans to the Fed. .
In this environment, the dollar suffers because the market was already assuming rate hikes in 2022 and 2023, thus buying the dollar. However, complications in the economic recovery could delay the rate hike, causing traders to sell on the dollar.
The euro started the week by confirming the breakout of the 1.1300 area, and actually advanced to test July 23 lows at 1.1185 on Wednesday, then traded in an extreme range on Thursday, Thanksgiving in the United States.
However, with the emergence of the Omicron variant of the coronavirus, the EUR / USD halted its fall in its tracks and traded 0.90% on Friday to close the week above 1.1300.
Currently, EUR / USD remains at 1.1306, waiting for the market to resume trading on Monday and traders to decide whether the pair’s rise was a buying opportunity or a short-term trend change.
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